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Microsoft Takes On SAP, Oracle and Salesforce.com with Dynamics

The software giant is planning both enterprise and on-demand options for its ERP and CRM software.

A couple of key themes emerged from Steve Ballmers March 14 keynote address at Microsofts annual Convergence conference in San Diego: Dynamics, the companys brand of ERP and CRM software, is definitely heading into big business, and its definitely going Live.

In other words, Microsoft is taking on SAP, Oracle and Salesforce.com in one fell swoop by building enterprise-worthy—and on-demand—business applications. Oh, and by the way, the transition is going to displace some partners—the group that is essential to Microsoft to get its Dynamics brand of enterprise resource planning and customer relationship management software into small and midmarket customers hands.

At the end of his much-anticipated speech—it was no secret that Ballmer would preview Titan, the multi-tenant version of Dynamics CRM expected to be available later this year—Ballmer opened up the floor for an informal question and answer session. The first two inquiries really set the stage for Microsofts path in the near future: Will the Live Services disintermediate partners? And is Microsoft looking to position itself to work better for large companies, especially those with multiple organizations?

To his credit, Ballmer answered both frankly.

"Will partners potentially be disintermediated [by on-demand software from Microsoft]? The honest answer is yes. But were not sure in what ways exactly," said Ballmer. "Every industry evolution does change the way we interact with partners. Fifteen years ago there used to be a business to integrate TCPIP stacks into Windows. That doesnt exist any more."

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Ballmer said he and others at Microsoft have put a lot of time into thinking through the reseller model—how partners can do their own verticalizations and customizations to remain relevant. "We understand the value our partners bring," he said. "If thats different than the partner value add today, thats OK as long as we get more done, partners have more opportunity and ultimately [the] customers get more done. That is the test we have."

The partner conundrum—how do partners remain relevant in an on-demand model where Microsoft hosts and maintains its services for customers directly—also has implications for the companys enterprise market position. Because while Microsoft largely depends on its partner channel to sell and implement Dynamics and its underlying technologies, it is Microsofts own direct sales channel that sells into the enterprise market, where SAP and Oracle live (and also sell through a direct sales force). Should Microsoft plan to focus a lot more energy in that direction with its Dynamics line, it puts even more pressure on an already heavily competitive channel.

In answer to the second question asked by a Dynamics user—is Microsoft gearing Dynamics toward the enterprise—Ballmer replied in the affirmative. "Yes," he said. "We support to some degree a simpler set of processes than our big competitors. SAP has 25,000 tables, each of which needs to be customized. We are much simpler. But there is nothing in our design philosophy that should hold us back, give people the capability they want, users can use and you can get implemented at whatever size you are. Doesnt mean we are going to take on the supply chain at GM tomorrow—its more complexity versus scale—and we will continue to build on that."

In interviews with eWEEK, Microsoft executives said that NAV and AX particularly are very much being positioned to support the complex processes found in the enterprise market—but that the actuality of that vision is several releases off for both suites.

Likewise, Microsoft partners believe that on-demand ERP capabilities will start showing up in probably two release cycles—about 18 months at Microsofts current development clip.